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What is about 20% of your height and could make some companies very happy?

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Here’s a good question – what is about 20% of your height and could help a number of fashion companies to increase their sales by a significant amount?

The answer is a “mini-me”.

Top fashion brands such as Burberry, Barbour jackets and Ugg boots have all seen increases in sales of certain items of clothing recently and some people are putting it down to the ex-Spice Girls singer, model and husband to David, Victoria Beckham.

Mrs. Beckham recently took time out from shopping to give birth to a baby daughter called Harper.

Photos in the press show that baby Harper is not only a cute looking baby but that she also follows her mum in the fashion stakes.

Now whilst Harper is only a few weeks old and therefore doesn’t get overly involved in detailed discussions with her mum as to what she will wear, the photos show that mother and daughter are wearing matching outfits.

This has resulted in a boom for sales of “mini-me clothing”.

A fashionable mum who owns a Burberry trench coat for example can now buy a mini version of exactly the same coat for her young daughter for £375.

If mum wears the trendy Australian Ugg shoes then the lucky baby daughter can also own her own pair for £104.

Anyone with young children will appreciate that they grow at a remarkable rate and this got the accountant in me thinking about the “cost per hour of use ratios” that will apply to these clothes purchases.

Unless your dad goes by the name of David Beckham then I think the resulting figures will be a bit of a shock…

Should you get married if you’re a finance person?

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Marriage – that traditional bond between man and woman where they share their journey through life. Joining in together with the good times and the bad times but above all being a symbol of ultimate love between a man and a woman.

That’s all very nice but forget about all that romantic stuff, if you’re a finance person is now the right time to get married?

One of the cornerstones of a marriage is the gold wedding ring and they are likely to be getting more expensive in the near future as yesterday the price of gold hit a new all time high record price of $1,610 an ounce.

Why has the price suddenly shot up? Is it because the world has suddenly got all romantic and there has been a surge in demand for gold wedding rings?

The answer has nothing to do with weddings but rather the case that gold is seen as a “safe haven” for investments during times of global economic uncertainly.

With the current economic problems in Greece and thoughts that high debt countries such as Italy and Spain may get drawn into the crisis, investors are avoiding shares and government bonds and instead investing in gold.

So, looking on the bright side for those of you that are about to get married, although your wedding ring is likely to become more expensive to buy, not only will your “emotional wealth” hopefully grow after you get married but so will the value of the gold investment on your finger.

Then again, whether you’ll ever be looking to sell your wedding ring at any stage in the future is another discussion altogether…

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Get rid of the Michelin star and you’ll be a better restaurant…

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Running a successful restaurant is tough.

Whilst a good restaurant can me it look easy, there are a lot of things you need to get exactly right to be successful. Everything from the ingredients, the menu, the chef, the ambiance and the waiting staff have to be just right.

Plus don’t forget that it’s a very competitive industry with new restaurants popping up all the time.

Perhaps one of the best differentiators a restaurant can hope for is to earn the renowned Michelin star. This award it only given to the most elite of restaurants.

As with a lot of businesses that adopt Porter’s generic strategy of differentiation, creating differentiators comes at a cost.

La Lisita restaurant in the French city of Nimes is run by top chef Olivier Douert and received its first Michelin star in 2006. It has however just done something that many people would consider unthinkable.

Namely, they have voluntarily given back their Michelin star and reverted to a “standard” restaurant.

Surely this is commercial suicide?

Giving up the most prestigious award a restaurant can achieve can’t help the restaurant, can it?

In fact though they may well be better off as a result.

The restaurant has given up the star so that they can reduce their costs to a more reasonable level. There are several requirements for having a Michelin star. These include having a minimum ratio of one waiter for every five to six customers compared to a standard restaurant where the ratio is closer to one waiter for every twenty customers.

It was proving difficult for La Lisita to recover these additional costs as higher spending customers weren’t visiting as often as they were before the financial crisis so they decided to drop the star.

They are still planning on serving great food but under a slightly different model.

Could this be the first of many restaurants that obtain the Michelin star to prove that they can but then revert to a different model to make more money?

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Do you wear cheap chic or luxury clothes?

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Floods earlier this year caused significant damage to major cotton crops around the world. A knock on effect of this is there is now a shortage of cotton and as a result cotton prices are currently at record highs.

“Cheap Chic” is a business model adopted by various clothing companies where, as the name suggests, clothing is made as cheap as possible but at the same time designed to be fashionable.

We’ve blogged elsewhere about Primark’s techniques for producing cheap clothing and yesterday another leading producer of Cheap Chic released their results.

Hennes & Mauritz, or H&M as they are commonly known, released their latest figures and they weren’t particularly attractive. They showed a 3rd consecutive fall in quarterly profits.

One of the main reasons for the fall in profits was the high price of cotton.

At the cheaper end of the clothing market the cost of material as a proportion of total cost is a lot higher than when compared with luxury brands such as Prada and Burberry where the material proportion is a lot lower. These luxury brands will instead have a higher ratio of other costs such as design, branding and marketing.

Back to H&M though and they have decided not to increase their prices to offset the higher material costs. Instead, they have accepted lower margins.

This contrasts with other clothing companies such as Next who have increased their prices due to higher costs.

70% of H&M is controlled by the founding Persson family so they have the power to maybe take a more long term approach to this issue. They are reportedly accepting lower margins on individual items with the hope of recovering this by increasing their share of the market due to their lower prices.

To me this is an interesting strategic business debate on how to deal with the knock on effects a natural disaster can have on the retail clothing market. Only time will whether H&M have done the right thing in accepting lower margins or whether they should have increased their prices along the same lines as Next.

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Would you criticise me if I spent ALL of YOUR bonus on alcohol?

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One of the ways that governments around the world have tried to kick start the economy during the recent recession has been through the reduction of interest rates.

10 years ago the Bank of England base rate was 11.38%.

Today, the current rate is 0.5%.

If individuals have variable rate loans or mortgages on their home and the interest rate falls, their interest payments will also fall.

As a result these people will have more money in their bank account and in theory this additional money should make them feel more relaxed about buying goods. If these additional goods are purchased then the economy is stimulated.

Lower interest rates may also encourage individuals and organisations to take out new loans. This money can then in turn be used to buy products which again should stimulate the economy.

Now, whilst low interest rates are good for people that are borrowing money, they are not so good for people who are investing money and looking to receive interest on the cash they’ve invested.

Certain parts of the population are more reliant on interest received as part of their income than others. Pensioners for example, who are no longer working can be hit particularly hard as they often rely on interest income.

I’ve just had a quick look at the internet bank Egg.

Egg was established in 1998 and 4 years ago was bought by Citigroup (Citi). It’s one of the top internet banks around and offers good interest rates when compared to some of their competitors.

But what sort of interest rate do you get?

The Egg site today includes the following text:

“Egg Savings Account – watch your money GROW.

Get 0.60% gross pa/AER variable and watch your savings grow.

Includes a fixed 12 month introductory bonus rate of 0.10% gross pa/AER from the date your account is opened on balances from £1 to £1 million.”

The accountant in me likes to play with figures so let’s just think about this for a moment.

If you open an account with Egg with a £1,000 deposit, after the first year you’ll receive a bonus of £1.

Yes, a whole £1.

My favourite drink is London Pride beer and a pint will set me back £3.50.

Just think, in one year’s time if I invested £1,000 in the Egg savings account I could blow the bonus on just over a quarter of a pint of beer.

Then again, I couldn’t actually buy a quarter of a pint as I’d have to pay tax on the £1 bonus received…

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What a remarkable change of direction for a car but are the guns safely locked away?

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Land Rover and Jaguar cars are classic British cars but their fortunes have really changed over the last couple of years.

This turnaround has arguably been due to “Globalisation”.

Land Rover was established in the UK in 1948 and manufactures the famous 4×4 off-road vehicles including the Range Rover whilst the first Jaguar cars came off the production line back in 1922.

A few years ago Jaguar Land Rover (JLR) was loss making and was asking for UK government support to keep it afloat.

The support from the UK government never came and the JLR business was bought by India’s Tata Motors for £1.5 billion in 2008.

This week the company announced its results for the year to 31 March 2011 and it has made a remarkable journey over the last couple of years.

The latest figures show revenues 51% higher than the previous year at nearly £10 billion with the number of cars sold being up 26% to 243,621.

What has caused this turnaround and why the reference to Globalisation?

Well, the British car company was acquired by an Indian company. This Indian company injected serious amounts of money to fund investments including new car models.

Although the cars are made in the UK, 75% are exported around the world. The last year has seen an acceleration of demand for the luxury JLR models in emerging markets such as China and Russia and these are the main growth areas.

So, a British car company owned by an Indian company selling to Chinese and Russian clients.

Ignoring the fact that a base model Jaguar or Land Rover is already pretty expensive it appears that some of this new demand wants to spend even more on their cars.

If £85,695 for the Range Rover autobiography isn’t enough to spend then there’s also the possibility to have a bespoke Range Rover model made for £140,000.

Amongst other things the extra £54,000 does however buy you a hand crafted gun cabinet in the boot for when you go hunting as well as a drinks cabinet which includes free drinks for the first year of ownership.

With alcohol, guns and a powerful car involved I’m assuming that after spending £140,000 the owner can afford to pay for a sober chauffeur to drive the car.

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What has the end of the world got to do with business strategy?

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Mr Harold Camping, an 89 year old evangelist from America predicts that tomorrow Jesus Christ will return to earth and true followers will be swept up, or in his words “raptured”, to heaven.

He predicts that giant earthquakes will sweep across the world to mark the start of the destruction of the earth and with the exception of the 200 million people that will have been raptured to heaven the rest of the world’s population will perish during the earth’s destruction.

Now, with a little bit of luck you’re sat at your desk with a cup of coffee reading this and the world didn’t come to an end on Saturday.

There’s a nice business strategy example in this though and it also involves a number of pet dogs and cats…

Some of the better known business strategy models include:

The Rational Model – the “original” strategic planning model with 3 clear steps of Analysis – Choice – Implementation.

The Emergent Model – made famous by Mintzberg’s analysis of Honda’s entry to the US motor bike market.

Logical Incrementalism – small regular changes to the strategic approach.

And then there is the concept of “Freewheeling Opportunism”. This is the situation where an organisation doesn’t have a formal plan but takes advantage of opportunities as and when they arise.

In a classic freewheeling opportunism move an American entrepreneur has just set up Eternal Earth-bound pets. This business offers a service to those individuals with pets who believe that they will be raptured tomorrow.

Unfortunately the rapture process highlighted by Mr Camping doesn’t allow people to take their pets. Eternal Earth-bound pets has taken quick advantage of this by offering a service to look after the pets after their owner has been raptured.

As at the time of writing, more than 250 clients have paid $135 for their pets to be looked after after the rapture.

Eternal Earth-Bound Pet’s tag line on their website is:

The next best thing to pet salvation in a Post Rapture World

Eternal Earth-bound pets has a no refunds policy if the end of the world doesn’t happen…

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Are they really going to get their money’s worth for $8.5 billion?

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What was founded 8 years ago by 2 entrepreneurs and was last week bought by Microsoft for $8.5 billion?

Little did Swedish entrepreneur Niklas Zennstrom and his Danish colleague Janus Friis realise that the Skype product they introduced back in 2003 would be worth a mighty $8.5 billion 8 years later.

Skype, whose name comes from the abbreviation of the initial project name of “Sky peer-to-peer” has turned into the most successful online voice and video phone service.

It has over 650m users with the vast majority of users only use the free call facilities.

Even allowing for its success in terms of the numbers that use it, it’s still a pretty hefty amount that Microsoft paid for it.

If you look at the history of the company you’ll see that Zennstrom and Friis founded it in 2003, it was then purchased by eBay for $3.1 billion in 2005 in the anticipation that it would be integrated into their online auction site to help people negotiate over their purchases.

This wasn’t a huge success and eBay cut their losses when they sold it 4 years later to a group of investors with the company valued at $2.75 billion.

The investors that bought it from eBay though have done pretty well.

With Skype being valued at $2.75 billion in 2009 here we are 2 years later with Microsoft buying it for $8.5 billion – a pretty healthy return of approximately 300% over a couple of years.

If you look at the figures behind Skype then some people will argue that Microsoft have paid over the odds for Skype.

In summary, the latest reported annual figures for Skype are:

Sales: $860 million

Profit (eh, actually it’s a loss): ($7 million)

Amount Microsoft paid for it: $8.5 billion (or $ 8,500 million)

So, Microsoft paid $8,500 million for a company whose most recent reported annual results showed a loss of $7 million.

These figures clearly show that Microsoft are hoping to create a lot of value from the acquisition of Skype and possible integrations discussed include using Skype within Microsoft Outlook and their computer game XBox.

This is a big amount of money to recover though and only time will tell whether the largest acquisition in Microsoft’s history will turn out to be a good call or not.

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The flight is cheaper than a single piece of paper…

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Ryanair is Europe’s largest low cost airline.

Their strategy is very much based on cost leadership and is a classic “no frills” approach on the strategy clock model.

In simple terms you don’t pay a lot for the service but at the same time you don’t get a lot. This approach can be very successful when comparing for example to another extreme where you pay a lot but don’t get a lot!

It released its results for the final quarter of 2010 today.

Air traffic control strikes and the bad weather in December were blamed for the Euro 10 million loss that was reported although the company is still confident of achieving full year profits of between Euro 380 million and Euro 400 million for their year ended 31 March 2011.

The average fare during the last quarter was reported as being Euro 34 and this will get you the flight and that’s about it. Extras which require additional payment include taking hold luggage, payment by credit card and seat allocation.

Their whole ethos is to minimise their costs. For example, they have a pretty aggressive policy when it comes to boarding passes.

Their terms and conditions state that passengers must print out their boarding pass at home. If they fail to do so and need one printed out at the airport then Ryanair will charge the passenger £40 to print the one piece of paper.

£40 to print a single piece of paper is pretty high but Ryanair argue that if passengers print out the boarding pass at home then it saves the cost of employing check in staff at the airport.

They have reported that people who forget to print out the boarding pass and are subsequently charged £40 remember to print it the next time.

Of course, it could be that if they’ve been charged £40 for printing one piece of paper then “next time” may well be with another airline as opposed to Ryanair.

The sound of the tills ringing was music to their ears even though there was no music in the shop…

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Christmas shopping for me is normally a last minute rush before the shops close on 24 December.

This year though I was determined to be organised and last weekend headed off to hit the shops in London’s West End.

It was a pleasant surprise to find that arguably the two most famous shopping streets in London (Oxford Street and Regent Street) were car free as they had been shut to traffic to encourage early Christmas shopping.

Although the streets were closed to traffic the number of shoppers made up for it. It also seemed as though every other shopper walking along Oxford Street was carrying a Primark shopping bag.

For those of you that haven’t heard of Primark, they are a very successful budget clothing brand with 145 shops in the UK together with an additional 62 shops in 6 other countries.

They compete via a classic cost leadership strategy whereby they keep their costs low by way of a variety of business techniques including for example:

•    Purchasing  stock in huge quantities so as to benefit from economies of scale;

•    Only stocking items in popular sizes so as to avoid “using up” valuable shop space with items that don’t sell so well;

•    Minimising advertising spend (why pay models and magazines when they can let their prices do the advertising for them?);

•    Not playing any music in its stores (why pay licence or royalty fees to artists?).

As well as focusing on cost leadership they are masters at “fast fashion”. In other words, they manage the supply chain to get the fashionable styles into the shops as quickly as possible so that they match the very latest designs that are seen on the catwalks and in the fashion magazines.

Gone are the days of fashion having 4 distinct seasons as far as Primark is concerned.

With so many people carrying Primark bags last week then my suspicion was that they were doing very well with their sales.

Press reports yesterday did indeed indicate that Primark did very well at the weekend.

It was reported that they had their most successful one day single shop performance in their 41 year history on Saturday.

The tills at their Oxford Street branch rang up to the tune of £820,000 in the one day.

Whichever way you look at it that’s a pretty good figure for one day’s worth of sales at a single shop.

Their cost leadership approach to strategy seems to be working. As well as their success on Saturday, their reported profits for the 53 weeks to 18 September 2010 showed profits increasing by 35% to £341 million on sales up 18% to £2,730 million.